For years, Microsoft Teams was inseparable from Microsoft 365. You bought M365 E3 or E5, and Teams came included — whether you wanted it or not. That changed in 2023 when regulatory pressure in the European Union and European Economic Area forced Microsoft to unbundle Teams from M365, creating a standalone Teams product that could be purchased separately. Microsoft subsequently extended standalone Teams options globally, creating a licensing landscape where organisations can acquire Teams capabilities — messaging, meetings, calling, rooms, and premium features — without committing to the full M365 productivity stack. This matters for enterprises using Google Workspace for productivity that need Teams for meetings with Microsoft-centric partners. It matters for organisations on legacy Office 365 plans that need Teams without upgrading to M365. It matters for companies that need Teams Phone for telephony without the full M365 E5 price tag. And it matters for every CIO doing the maths on whether the Teams-included M365 bundle is still the right commercial decision or whether an unbundled approach saves money. This guide maps every standalone Teams licensing path: the free tier, Teams Essentials, the M365-unbundled Teams add-on, Teams Phone, Teams Rooms, Teams Premium, calling plans, operator connect, and direct routing — with the cost comparisons that determine which path is right for your organisation.
In July 2023, Microsoft began selling Teams separately from Microsoft 365 and Office 365 in the European Union and European Economic Area, following a European Commission investigation into the bundling of Teams with M365 as a potentially anticompetitive practice. Microsoft removed Teams from new M365 and O365 commercial subscriptions in the EU/EEA and made it available as a separate add-on.
Subsequently, Microsoft extended standalone Teams availability globally, creating a new licensing structure where organisations worldwide can purchase Teams independently. For existing M365 subscribers who already had Teams included, nothing changed — Teams remains part of their subscription. The unbundling affects new subscriptions and creates new commercial options for organisations that want Teams capabilities without a full M365 commitment.
The commercial implication: For existing M365 E3/E5 customers, Teams remains included at no additional cost. Do not purchase standalone Teams for users who already have M365 E3, E5, Business Basic, Business Standard, or Business Premium — they already have Teams. The standalone options exist for users who do NOT have these plans and need Teams capabilities.
Microsoft offers a free version of Teams for organisations with up to 100 participants per meeting and limited features. The free tier is appropriate for very small businesses or personal use but lacks the capabilities enterprises require.
What is included: Unlimited chat messages (personal and group), meetings of up to 60 minutes with up to 100 participants, 5 GB of cloud storage per user, screen sharing during meetings, custom backgrounds, Together mode, and basic file sharing. Live captions are available. Integration with other Microsoft products is limited.
What is NOT included: Meeting recording, meeting transcription, breakout rooms, scheduled meetings (with full calendar integration), administrative controls, compliance features (eDiscovery, legal hold, DLP), phone system capabilities, Teams Rooms management, custom branding, enterprise-grade SLA, or technical support beyond community forums. The 60-minute meeting limit and 100-participant cap make the free tier impractical for most business use.
Who should use it: Very small teams (under 10 people) exploring Teams before committing to a paid plan. Freelancers or sole proprietors who need basic chat and brief meetings. External collaborators who need to participate in meetings hosted by paid Teams users (they do not need their own licence to join meetings hosted by others). The free tier is not appropriate for any organisation with compliance requirements, administrative needs, or more than occasional use.
Teams Essentials is the entry-level paid Teams plan designed for small and mid-size businesses that need Teams for meetings and collaboration without the full M365 productivity suite.
What is included: Unlimited chat, meetings up to 30 hours with up to 300 participants, 10 GB of cloud storage per user, meeting recordings (with storage in OneDrive/SharePoint), meeting scheduling with Outlook calendar integration, group meetings and webinars for up to 300 attendees, live captions and transcription, breakout rooms, custom backgrounds, whiteboards, polls, together mode, collaborative annotations, and phone and web support.
What is NOT included: Office desktop applications (Word, Excel, PowerPoint), Exchange Online mailbox, SharePoint Online sites, OneDrive for Business (full 1 TB), advanced compliance (eDiscovery, legal hold, DLP), advanced admin controls, information barriers, Teams Phone capabilities, and Teams Premium features. Teams Essentials users get 10 GB of cloud storage, not the 1 TB OneDrive allocation that M365 plans provide.
The commercial case: Teams Essentials at $4/user/month is the right plan for organisations that use Google Workspace (or another productivity suite) as their primary platform but need Microsoft Teams for meetings, chat, and collaboration with partners and customers who use the Microsoft ecosystem. A 500-person organisation on Google Workspace that needs Teams for external collaboration pays $2,000/month ($24,000/year) for Teams Essentials — a fraction of the cost of migrating to M365 E3 at $36/user/month ($216,000/year) to get Teams along with Office apps, Exchange, and SharePoint that the organisation does not need. See Microsoft Licensing for Beginners.
The standalone Teams add-on is the product created by the EU unbundling. It provides the same Teams experience that was previously included in M365 and O365, but sold separately.
What is included: The full Teams experience equivalent to what M365 E3 users receive: unlimited chat, meetings up to 30 hours with up to 1,000 participants (in standard meetings, up to 10,000 in view-only broadcasts), meeting recording with transcription, meeting scheduling, webinars, live events, breakout rooms, all collaborative features, and the standard administrative and compliance capabilities available in the Teams service.
Who needs it: The standalone add-on is specifically designed for two scenarios. First, new EU/EEA customers purchasing M365 or O365 where Teams is no longer bundled — they add Teams back at $5.25/user/month. Second, organisations on Office 365 plans (O365 E1, E3, E5 in regions where Teams has been unbundled) that want to add Teams without upgrading the entire plan.
The pricing reality: For EU/EEA customers on new M365 E3 subscriptions, the total cost is now M365 E3 ($36) + Teams ($5.25) = $41.25/user/month. For existing M365 E3 customers who had Teams included, the cost remains $36 — Microsoft did not increase the price when unbundling; it reduced the M365 price by $2 and priced Teams at $5.25, resulting in a net $3.25 increase for customers who add Teams back. This pricing structure has been criticised as effectively raising the total cost of the M365+Teams bundle while appearing to respond to unbundling requirements.
Teams Phone transforms Microsoft Teams from a meetings and messaging platform into a full enterprise telephone system, replacing traditional PBX systems, SIP trunks, and desk phones with cloud-based calling.
Teams Phone Standard ($8/user/month): The base telephony licence that provides cloud PBX capabilities: make and receive calls, call transfer, call forwarding, voicemail, auto-attendants, call queues, call park, shared line appearance, and emergency calling. Teams Phone Standard does NOT include PSTN connectivity — it provides the phone system, but the actual connection to the public telephone network requires a separate calling plan, operator connect, or direct routing configuration.
Included in M365 E5: Teams Phone Standard is included in M365 E5 ($57/user/month). Organisations on E5 already have the phone system licence at no additional cost. They still need to add PSTN connectivity through one of the three options below. This is one of the key differentiators between E3 and E5: E3 does not include Teams Phone; E5 does. See E3 vs E5 comparison.
Teams Phone with Calling Plan ($12/user/month domestic, ~$24/user/month international): Bundles Teams Phone Standard with a Microsoft Calling Plan that provides PSTN connectivity through Microsoft as the carrier. Domestic calling plans include a monthly minute allocation for calls within the user’s country (typically 3,000 minutes for enterprise plans). International calling plans add outbound international minutes. Microsoft Calling Plans are the simplest option (no third-party carrier, no SBC infrastructure) but are available in limited countries and may be more expensive per minute than traditional carriers for high-volume callers.
Path 1 — Microsoft Calling Plans: Microsoft acts as the telephone carrier. Simplest to deploy (no additional infrastructure), limited geographic availability (approximately 30 countries), minute allocations may not suit high-volume callers, and per-minute overage charges apply. Best for organisations in supported countries with moderate calling volumes that want to eliminate carrier relationships entirely.
Path 2 — Operator Connect: A third-party telephone carrier integrates with Teams Phone through the Operator Connect programme. The carrier provides PSTN connectivity, number management, and calling plans. The organisation gets the flexibility of choosing a carrier with competitive rates while avoiding the infrastructure complexity of direct routing. Operator Connect carriers include major telcos (BT, AT&T, Verizon, Deutsche Telekom, and others) and is growing. Best for organisations that want carrier flexibility with managed integration.
Path 3 — Direct Routing: The organisation connects its own Session Border Controller (SBC) to Teams Phone, routing calls through existing SIP trunk providers. Direct Routing provides maximum control over carrier selection, call routing, and cost management. It requires SBC hardware or virtual appliance deployment, SIP trunk configuration, and ongoing management. Best for organisations with existing carrier contracts, complex call routing requirements, or operations in countries where Microsoft Calling Plans and Operator Connect are not available.
The total Teams Phone cost per user depends on the base plan and PSTN connectivity choice:
M365 E5 + Microsoft Calling Plan (domestic): E5 ($57) includes Teams Phone. Add Calling Plan (~$12) = $69/user/month total. The phone system cost is embedded in the E5 subscription. Teams Phone adds $12 for PSTN connectivity.
M365 E3 + Teams Phone + Calling Plan: E3 ($36) + Teams Phone ($8) + Calling Plan (~$12) = $56/user/month. Cheaper than E5 if the only E5 feature needed is Teams Phone. The $1/month saving vs E5 is marginal, so evaluate whether E5’s security features (Defender for Endpoint P2, Cloud App Security, Azure AD P2) justify the $1 premium.
M365 E3 + Teams Phone + Operator Connect/Direct Routing: E3 ($36) + Teams Phone ($8) + carrier costs (varies, typically $2–$8/user/month depending on carrier and volume) = $46–$52/user/month. This is often the most cost-effective option for organisations with existing carrier relationships that provide favourable rates. See Microsoft negotiation leverage points.
Teams Essentials + Teams Phone: Teams Essentials ($4) + Teams Phone ($8) + Calling Plan or carrier = $24–$36/user/month. The lowest-cost path to Teams-based telephony for organisations that do not need M365 productivity applications. A Google Workspace organisation adding Teams Phone for 500 users pays $12,000–$18,000/month instead of migrating to M365 E3 ($18,000/month) or E5 ($28,500/month).
Teams Rooms brings the Teams meeting experience into physical conference rooms through dedicated hardware (meeting displays, cameras, speakers, compute devices) with a room-specific licence.
Teams Rooms Basic (free, up to 25 rooms): Provides the core Teams Rooms experience for up to 25 rooms: join and host Teams meetings, share content, use camera and audio, and manage rooms through the Teams admin centre. The 25-room limit makes this appropriate for small organisations or pilot deployments.
Teams Rooms Pro ($40/room/month): The full Teams Rooms experience: unlimited rooms, advanced room management in the Teams Rooms Pro Management portal, AI-powered intelligent room insights, remote device management, conditional access support for room accounts, dual-screen support, and premium meeting features including front row layout, intelligent speaker recognition, and spatial audio. Teams Rooms Pro also includes Teams Phone for the room device, enabling the room to function as a conference phone.
The licensing trap: Teams Rooms licences are per-room, not per-user. Each conference room with Teams Rooms hardware needs its own licence. An enterprise with 200 conference rooms pays $8,000/month ($96,000/year) for Teams Rooms Pro. This cost is separate from the user-level Teams or M365 licences. Budget for Teams Rooms as a facilities cost, not a per-user IT cost, to avoid underestimating the total Teams investment.
Teams Rooms requires certified hardware. Microsoft certifies devices from Poly, Yealink, Logitech, Crestron, Neat, Cisco, and others. Hardware costs range from $2,000–$5,000 for a small huddle room system to $10,000–$30,000+ for a large boardroom with multiple displays, premium cameras, and ceiling microphone arrays. The hardware cost is a one-time capital expense; the Teams Rooms licence is a recurring monthly cost. Total cost of ownership for a meeting room: hardware ($3,000–$15,000 one-time) + Teams Rooms Pro ($480/year) + network and AV infrastructure.
Teams Premium is an add-on licence that provides advanced meeting features beyond what is included in standard Teams (whether through M365 or standalone).
What Teams Premium includes: Intelligent meeting recap (AI-generated meeting notes, action items, and topics), live translations for captions (40+ languages in real time), custom branded meeting templates (organisation-specific branding, disclaimers, watermarks), advanced meeting protection (watermarking for shared content, who-can-record restrictions, end-to-end encryption for meetings), virtual appointments with SMS notifications and queue management, advanced webinar features (custom registration, speaker bios, waitlists), custom together mode scenes, and advanced RTMP-in for streaming meetings to external platforms.
What Teams Premium does NOT include: Teams Phone (separate licence), Teams Rooms (separate licence), or any M365 productivity applications. Teams Premium enhances the meeting experience; it does not provide telephony, room management, or productivity tools.
The commercial evaluation: Teams Premium at $10/user/month is a significant per-user investment. For 5,000 users, the annual cost is $600,000. The features that drive the most value — intelligent meeting recap and live translated captions — are increasingly expected as standard capabilities in the era of AI-enhanced collaboration tools. Organisations should evaluate Teams Premium against three criteria: (1) does the organisation conduct enough meetings where AI recaps provide measurable time savings? (2) does the organisation have multilingual teams where live translation enables participation that would otherwise not occur? (3) does the organisation have compliance or security requirements that mandate meeting watermarking, encryption, or branded templates? If two or more criteria are met, Teams Premium may justify the investment. If only one is met, a targeted deployment (licensing Premium only for the affected user groups) is more cost-effective than enterprise-wide deployment. See Copilot and AI feature ROI measurement.
The right Teams licensing path depends on the organisation’s existing productivity platform, telephony requirements, and meeting sophistication needs.
Teams Essentials ($4/user/month) is the right choice. It provides full Teams meeting capability, chat, and collaboration at a fraction of the M365 cost. Do not purchase M365 to get Teams unless the organisation also needs Office applications, Exchange, and SharePoint. Total cost for 1,000 users: $4,000/month ($48,000/year).
Teams is already included. No standalone Teams purchase needed. The add-on decisions are: Teams Phone ($8/user/month) if telephony is needed (already included in E5), Teams Rooms Pro ($40/room/month) for conference rooms, and Teams Premium ($10/user/month) for advanced AI meeting features. Do not purchase Teams Essentials or standalone Teams for users who already have M365.
Add the standalone Teams add-on ($5.25/user/month) to restore the Teams experience. Compare the total cost (M365 + Teams) against competitive alternatives (Google Workspace + Google Meet, Zoom, Cisco Webex) to confirm the Microsoft platform remains commercially competitive. For organisations in the EU considering a new M365 deployment, the unbundled pricing creates an opportunity to evaluate whether Teams is actually needed or whether a lower-cost meeting platform would suffice for the organisation’s collaboration requirements.
Teams Essentials ($4) + Teams Phone ($8) + PSTN connectivity ($2–$12) = $14–$24/user/month. Compare against Zoom Phone ($10–$20/user/month), RingCentral ($20–$35/user/month), or 8x8 ($24–$44/user/month). Teams Phone with Operator Connect or Direct Routing is often the most cost-competitive option when the organisation also needs Teams for meetings and chat. The combination eliminates the need for separate meeting and telephony platforms.
Calculate the full PBX replacement economics: current PBX maintenance and support costs (typically $3–$8/user/month for managed PBX), SIP trunk costs ($1–$5/user/month), desk phone depreciation, and PBX hardware end-of-life replacement costs. Teams Phone with Operator Connect or Direct Routing at $10–$20/user/month (Microsoft licence + carrier) replaces the PBX, eliminates hardware refresh cycles, and provides a unified communications platform. Most PBX-to-Teams migrations show positive ROI within 18–24 months when accounting for avoided PBX hardware replacement, reduced carrier costs, and consolidated vendor management. See the remote and hybrid work licensing guide.
Every user with M365 E3, E5, Business Basic, Business Standard, or Business Premium already has Teams (in non-EU/EEA regions and for existing subscriptions). Audit the licence estate for users who have both an M365 plan that includes Teams and a standalone Teams or Teams Essentials licence. Remove the standalone licence and save $4–$5.25/user/month. This is the most common Teams licensing waste.
Not every user needs Teams Phone. Knowledge workers who primarily communicate via Teams chat and meetings may not need PSTN calling capability. Deploy Teams Phone to users who actually make and receive external phone calls: reception, sales, customer service, executives, and field staff. A 5,000-user organisation where only 2,000 users need telephony saves $24,000/month by licensing Teams Phone for 2,000 users ($16,000) instead of 5,000 ($40,000).
Microsoft Calling Plans are the simplest option but often not the cheapest. Compare the per-minute cost of the Microsoft Calling Plan against Operator Connect or Direct Routing with existing carriers. High-volume callers (sales teams, call centres) almost always achieve lower per-minute costs through Operator Connect or Direct Routing. The infrastructure investment in Direct Routing (SBC deployment and management) pays for itself within 6–12 months for organisations with 500+ phone users and high call volumes.
Intelligent meeting recap is valuable for managers and executives who attend many meetings. Live translated captions are essential for multilingual teams. Meeting watermarking and encryption are required for regulated industries. Deploy Teams Premium only to the user groups that benefit from specific features, not enterprise-wide. A targeted deployment of 1,000 users (from a 5,000-user total) saves $480,000/year compared to full deployment.
The free Teams Rooms Basic licence supports up to 25 rooms. For organisations with 25 or fewer meeting rooms, this eliminates the Teams Rooms Pro cost entirely. Even organisations with more than 25 rooms can apply the 25 free licences to their least-used rooms and purchase Teams Rooms Pro only for high-traffic conference rooms and boardrooms that benefit from advanced management and intelligent features.
For EU/EEA organisations where Teams is now a separate line item, the Teams add-on becomes a negotiable element in the Enterprise Agreement. Use the unbundled pricing as leverage: the total M365+Teams cost should not exceed what the bundled price was before unbundling. If Microsoft’s post-unbundling total is higher, negotiate the Teams add-on price down or secure additional concessions elsewhere in the EA. Teams Phone and Teams Premium are also negotiable, particularly when bundled with large M365 commitments. See key leverage points.
Frontline workers who need Teams for communication but not Office desktop applications should be on M365 F1 ($2.25/user/month) or F3 ($8/user/month), not E3 ($36/user/month). F1 and F3 include Teams with the same messaging and meeting capabilities. F3 adds web and mobile Office apps. For a retail or manufacturing enterprise with 3,000 frontline workers, F1 instead of E3 saves $101,250/month. See M365 E3 vs E5 vs F3.
“The Teams unbundling was Microsoft responding to regulatory pressure, not customer demand — but it created a genuine commercial opportunity for organisations that never wanted the full M365 stack. Teams Essentials at $4/user/month is the most underrated licence in the Microsoft portfolio: it gives you the entire Teams meeting and chat experience for one-ninth the price of M365 E3. For organisations on Google Workspace, Zoho, or other productivity platforms that need Microsoft-compatible meetings, it is the obvious answer. For organisations already on M365, the focus should be on avoiding over-deployment of add-ons: Teams Phone only for users who make phone calls, Teams Premium only for users who benefit from AI features, and Teams Rooms budgeted as facilities cost, not per-user IT cost. The organisations that overspend on Teams are the ones that deploy every add-on to every user because the per-user price seems low. At scale, $10 per user per month across 10,000 users is $1.2 million per year. That is not a low price.” — Fredrik Filipsson, Co-Founder, Redress Compliance
Yes. There are multiple paths to Teams without M365: Microsoft Teams (Free) for basic chat and short meetings, Teams Essentials ($4/user/month) for full meetings and chat without Office apps, and the standalone Teams add-on ($5.25/user/month) for the full Teams experience that was previously bundled with M365. Teams Phone can also be added to these standalone plans for telephony capability.
In response to a European Commission investigation into the bundling of Teams with M365 as a potentially anticompetitive practice, Microsoft began selling Teams separately from M365 and O365 in the EU/EEA in July 2023. Microsoft subsequently extended standalone Teams options globally. For existing M365 subscribers, Teams typically remains included in their subscription.
Teams Phone Standard is $8/user/month (included in M365 E5 at no additional cost). PSTN connectivity adds to this: Microsoft Calling Plan (domestic) is approximately $12/user/month, international approximately $24/user/month. Operator Connect and Direct Routing use third-party carrier rates (typically $2–$8/user/month depending on volume). Total Teams Phone cost per user: $10–$32/month depending on plan and connectivity choice.
For existing subscriptions, yes — Teams is included in M365 E3. For new subscriptions in the EU/EEA, Teams may be a separate add-on ($5.25/user/month) due to the unbundling. Outside the EU/EEA, new M365 E3 subscriptions generally still include Teams. Check your specific agreement and region, as the bundling rules continue to evolve.
Teams Premium ($10/user/month add-on) provides AI meeting recaps, live translated captions (40+ languages), custom branded meeting templates, meeting watermarking and end-to-end encryption, advanced webinar features, and virtual appointment capabilities. It is most valuable for organisations with heavy meeting cultures (where AI recaps save significant time), multilingual teams (where live translation enables participation), and regulated industries (where meeting security features are compliance requirements).
Teams Rooms Basic is free for up to 25 rooms per organisation. Beyond 25 rooms, Teams Rooms Pro ($40/room/month) is required. Even organisations with more than 25 rooms can use the 25 free licences for their lowest-traffic rooms and purchase Pro only for high-traffic spaces that benefit from advanced management, intelligent speaker recognition, and AI-powered room insights.
Redress Compliance provides independent Microsoft licensing assessments covering Teams standalone vs M365 bundling analysis, Teams Phone cost modelling (Calling Plans vs Operator Connect vs Direct Routing), Teams Rooms budgeting, and EA negotiation support for unbundled Teams pricing.